Standard & Poor’s Ratings Services has raised its long-term foreign currency sovereign credit and senior unsecured debt ratings on the State of Qatar to ‘A+’ from ‘A-‘, and its long-term local currency sovereign credit rating on Qatar to ‘A+’ from ‘A’. The outlook is stable. Standard & Poor’s also affirmed its ‘A-1’ short-term local and foreign currency sovereign credit ratings on the state.
At the same time, Standard & Poor’s also raised its long-term foreign currency issuer credit rating on Qatar Petroleum to ‘A+’ from ‘A-‘, in line with that on the sovereign, its sole shareholder. The outlook is stable.
“The upgrade primarily reflects ambitious political reforms, strong projected GDP growth, continued fiscal prudence, and a decrease in the government’s debt and debt-service burdens,” says Standard & Poor’s credit analyst Luc Marchand.
The ratings on Qatar are also supported by:
- Prudent fiscal policy. Qatar ‘s budget for 2003-2004 assumes an average oil price of US$17 per barrel and targets a deficit of about 2.3% of GDP. Assuming an average oil price of about US$27 per barrel, there will be a surplus of about 6% of GDP. General government debt has declined in recent years;
- Substantial external liquidity. Qatar ‘s current account surplus in 2002, estimated at 16% of GDP, has further strengthened its external position;
- A small and wealthy population and strong growth. Qatar ‘s GDP per capita, estimated at US$29,800 in 2003, places it among the wealthiest nations. Growth is expected to accelerate on the back of gas and gas-related industries and the development of the private sector.
The ratings are constrained by:
- Public sector external debt. Project-related borrowing over the past few years led to a build-up of public sector external debt that peaked at 167% of external current account receipts in 1997, but declined to less than 92% by year-end 2002;
- Developing political and economic institutions. Qatar ‘s political system is evolving slowly from a traditional tribal system to a modern one, and has a history of difficult succession.
“The stable outlook balances Qatar ‘s expectations of higher budgetary revenues and continued fiscal prudence, which should enable the government simultaneously to increase its net foreign assets and invest in physical and human capital development, against the challenge of managing a narrowly based economy,” says Marchand. “The maturing of the domestic political environment and diminished geopolitical risks reduce the likelihood of political and economic shocks.”